Financial Investors' Dream Stocks

Make finding the best financial stocks a reality.

Investors are always hunting for the next big stock -- the dream stock whose price increases several times over when the market finally discovers it. It's easy to look back and see what the 10 best stocks of the past decade were. But for my part, I'm more interested in the tools that can help me find tomorrow's greatest companies.

At a time when financial companies are being pounded, great opportunities abound. One tool offers a variety of resources to help with finding tomorrow's financial leaders: Motley Fool CAPS.

MVC CapitalBusiness development company MVC Capital acts a lot like a venture capital firm, but you don't have to be an accredited investor to own shares. MVC invests in small and middle-stage companies with its own money, but like a REIT, it isn’t required to pay taxes as long as it pays out most of its income in dividends.

MVC has also been weathering the credit crunch much better than other financial firms, since it doesn’t rely on cheap debt. In fact, since chairman Mr. Tokarz and his team took over in fiscal 2004, the net assets of the company have nearly tripled. While insider buys alone aren't always a telltale indicator of a great stock, the multiple insider buys at MVC for significant amounts, coupled with this performance, bode well. More than 98% of the 813 CAPS members rating MVC Capital are bullish, too.

Apollo InvestmentAnother business development company, Apollo Investment, has plowed more than $5 billion into various companies since its 2004 IPO. While other financial players like Citigroup(NYSE:C) and Merrill Lynch(NYSE:MER) are struggling with the credit markets, Apollo management looks to fill the void and employs a patient yet opportunistic strategy.

Apollo has several options for providing liquidity and new capital, including periodic follow-on equity offerings and its $1.7 billion, five-year revolving credit facility. Investors have little reason not to consider Apollo -- the firm currently pays a dividend that yields more than 12%. More than 97% of the 940 CAPS members rating Apollo Investment expect it to beat the S&P going forward.

Allied Irish BanksMany CAPS investors like Allied Irish Banks for its healthy growth and diversified markets, as well as its few competitors in Irish banking. Allied recently reported strong growth in customer deposits and even raised its dividend -- something very few banks feel comfortable doing these days. And unlike other banks such as WashingtonMutual(NYSE:WM), it’s been able to fund all of its lending activity with customer assets.

Allied has seen its loan book deteriorate, though. However, its average loan-to-value ratio across all property and construction loans (including the riskiest residential development) is a well-protected 71.3%. The underlying quality of the bank’s assets and management give more than 97% of the 1,562 CAPS members rating Allied Irish a reason to be bullish.

optionsXpressWhile competitors attempt to go after longer-term buy-and-hold investors, optionsXpress caters to a niche of traders, who often become even more active in volatile periods. The company allows retail investors to trade options, something that many investors have turned to during the current market’s high volatility as a tool to hedge portfolios.

And recent numbers don't look too bad -- the company held its own and increased revenue in its second quarter by 4% year over year, and net income inched higher by 1%. optionsXpress also recently completed an acquisition of a futures broker, Open E Cry, and is also on the hunt for more opportunities. More than 96% of the 1,126 CAPS members rating optionsXpress expect it to outperform the market going forward.

Let 115,000 investors be the judgeThe collective wisdom of a huge pool of investors can help give context to a page of numbers developed through a stock screen. But even with an entire community’s worth of qualified opinions acting as the judge, individual investors are still the jury and should perform their own due diligence.

Run your favorite parameters through the Motley Fool CAPS screener. It's totally free, and even fun.